The two key markets underpinning global finance are seldom correlated and such moves tend to be rare and brief. This year’s quarterly slump — the worst synchronized decline since both benchmarks have been available — is enduring enough to leave investors questioning how to balance risks in their portfolios.
“Conventional portfolios are in big trouble,” said Duncan MacInnes, an investment director at 25.3-billion-pound wealth manager Ruffer LLP. “Cross-asset correlations are much higher than they were and there is an illusion of diversification across the industry. Everyone is doing worse than they thought they would.”Article content
Michael Hartnett, chief investment strategist at Bank of America Corp., said rising inflation rates meant a third “great bear” market for U.S. bonds was now under way. BofA is warning that long-term bond yields will rise above four per cent during 2024 and increases in interest rates by the U.S. Federal Reserve in response to higher inflation are also likely to drag down U.S. stocks.
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